Landlords should invest in Britain’s coastal beach cities for the best returns. That’s according to new figures from HSBC.
Coastal cities often have plenty of cheap property. At the same time, rents are often relatively high. This may be because they often have young and transient populations who are keen to rent, but not to buy.
Where are the coastal property hotspots?
Southampton tops the list. Its average property price is a very affordable £138,901. But its average monthly rent dwarfs that of much of the UK, at an impressive £901. That leaves landlords with an average rental yield of £7.82%. Southampton’s near neighbour, Portsmouth, offers pretty good figures too, with an average yield of 6.55%.
Landlords looking to invest in a more traditional holiday destination should look to old favourite, Blackpool. Yields there are only just behind Southampton’s, at 7.81%. Landlords can pick up a property there for a bargain £75,943, and let it for £493 a month.
Other popular seaside cities that made the top fifty included Brighton and Bournemouth.
City investments
It’s clear from the figures that there is often no correlation between house prices and rental returns. Brighton is one of the UK’s most expensive cities, and yet it produces great returns because of the popularity of its rental property.
In London, things are different. The city has lots of expensive property, but rents are not as high in comparison. Yields there are in the range 4-6%. The most expensive areas to buy in, such as Kensington and Chelsea, are also those with the lowest yields. Perhaps this is because those with enough money to rent in those areas, will also have enough money to buy, meaning less competition for rental property.
The cities to invest in away from the coast are Hull, Manchester and Nottingham. All offer yields over 7.5%. Coventry is not far behind on 7.13%. All of these are old industrial cities with a good enough infrastructure to attract people and jobs. At the same time, they don’t have the same problems with housing shortage that many southern areas do. That means buying is relatively cheap. They also all have big student populations, which provides a ready pool of willing renters.
Getting it right…
Many landlords don’t have much choice where they invest, as they need to stay close to home. But even within cities, there can be big differences in rental yields. Look for up-and-coming areas popular with young people who prefer to rent than buy.
Peter Dockar, Head of Mortgages at HSBC, advises “it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded so it is key landlords do their research as often the most popular locations may not offer the best return”.
That makes sense to us. Being a landlord can be expensive, with letting agents fees, maintenance, landlords insurance and the rest all adding up. But with a bit of research, landlords can make sure they maximise their yields and help offset some of those costs.